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Easy deficit trim: Ax the dollar bill

'Paper' currency is not very durable, the author writes.| Reuters Photos

By JIM KOLBE | 12/19/11 9:59 PM EST

There’s been a lot of talk recently, on Capitol Hill and elsewhere, about shared sacrifice. Recently, Congress empowered the supercommittee to come up with a 10-year, $1.2 trillion deficit-reduction plan. That would have been no small feat, and the lawmakers did bruit about various ideas to eliminate government waste, streamline the Tax Code and cut discretionary spending.

Well, here’s a modest proposal — something that could save us billions of dollars without raising taxes or cutting programs. It’s time to eliminate the $1 greenback.

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Each year, the United States produces roughly 4 billion $1 bills; most of these are needed just to replace the 3 billion $1 bills that are pulled from circulation, shredded and sent to landfills annually. At the same time, a $1 coin lasts for 30 years or longer — check your pockets if you don’t believe me — and during its lifetime, it could do the job of up to 17 $1 dollar notes.

The government’s own watchdog, the nonpartisan Government Accountability Office, has long advocated the elimination of the dollar bill. Its most recent report in March estimated that switching from a $1 bill to a $1 coin would save at least $5.5 billion over 30 years. Previous studies, dating back to 1990, have put the savings at more than half a billion per year. If we had listened to the GAO the first time, we could already have saved more than $10 billion. I don’t know about you, but where I come from, that’s real money.

Think about it. Everyone would rightly scoff at the notion of using paper for pennies, nickels, dimes and quarters. How does it make any more sense to continue using a dollar bill, which today has the value of a 1970s quarter? The fact is, “paper” currency — actually a cotton/linen composite — is not very durable. It would cost us too much to have to replace those low-value coins over and over again. So, we make low denominations out of alloys.

Similarly, the paper dollar was never intended to be heavily traded when it was initially introduced 150 years ago. In 1860, when Abraham Lincoln was campaigning for president, a dollar bill could buy a quarter acre of land or cover the cost of renting a room for an entire month. A dollar was more than a day’s wage for a laborer.

So most small transactions were made in coin. That’s not true today, and it is costing us money. A lot of money.

This is the primary reason nearly every other major economy retired its low-denomination paper money decades ago. Those countries have proved that significant benefits exist, so this is not just theory. Indeed, when Canada made the transition 25 years ago, the savings realized were more than ten times government estimates.

Average Americans are demanding that Washington find reasonable debt-reduction measures. Abandoning the dollar bill is one simple option that can get us started. A January 2011 poll by the Tarrance Group and Hart Research revealed that the public actually favors a dollar coin transition by a 2-to-1 margin after they understand the cost savings.

Sometimes, it can be hard to see easy solutions because we are simply stuck in our old ways of thinking. The supercommittee’s inability to agree on a deficit-reduction solution and the partisan infighting that accompanied it underscore that we should focus on areas where both Republicans and Democrats can agree — solutions that help reduce our deficit and save billions without cutting programs or raising taxes. In today’s climate, it will become harder and harder to ignore this simple, common-sense change.

Former Rep. Jim Kolbe, a Republican, served Arizona’s 8th Congressional District from 1985 to 2007. He is currently a senior transatlantic fellow at the German Marshall Fund, senior adviser at McLarty Associates and honorary chairman of the Dollar Coin Alliance.

Readers' Comments (18)

Currently, there are well over a billion dollar coins stored in Federal Reserve vaults. There will be over two-billion dollar coins in storage in a matter of a few years.

Surveys show 75% of Americans do not like dollar coins.

Our Government Accountability Office recently reports seigniorage profit for the feds selling dollar coins to the public is $5.5-billion over 30 years. When this profit is deducted, costs to American taxpayers is $3.4-billion over the same time period.

You do not mention in your article American taxpayers are footing the bill for the feds making a profit. American families are paying billions for manufacture of dollar coins which are collecting dust in government vaults.

2010 costs of minting penny and nickel coins:

Penny - 1.8 cents Nickel - 9.3 cents

For 2010 year, the feds lost $27.5-million producing pennies and nickels. This is lost American taxpayer money.

People will use dollar coins if dollar bills are no longer minted. If this happens, the coins currently in the vaults will find their way into circulation quickly. I agree that the cost of minting small coinage is a money loser. We should eliminate the penny while we're at it. The half-penny was eliminated in 1858. Our current penny is worth around 1/20th of an 1858 penny. Today's nickel is only worth 1/5th of an 1858 cent! Maybe it's time to lose the nickel as well.

Dollar coins can last essentially forever, because almost nobody uses the things. It you want to do something useful, drop a zero off the value of the dollar and start replacing it with a "new dollar" worth 10 times as much, returning the dollar to its value circa 1950.

So we have tons of dollar coins sitting around because NOBODY WANTS TO USE THEM. And your solution is to get rid of the paper dollar so people will be forced to use them? How about we save money by melting down those coins and reusing the metal.

People don't like pennies, nickels or dimes. They tolerate quarters. Paper dollars are used very heavily. It would be ridiculous to get rid of them. This article is a worthless lobbying attempt. Paper dollars aren't going anywhere.

I think getting rid of the dollar is correct. Get rid of it as the world currency and we will have to live within our means. NO MORE PRINTING MONEY! The federal government will not be able to saddle our kids with debts they won't be able to pay and the overbearing government will have to down. Less stupid rules and regulations, less special interest, less entitlements. NO MORE CLASS WARFARE!

Everyone seems to be missing the obvious point: Merchants can't change from a paper dollar to a dollar coin because their cash register tills aren't designed for them. Every cash register and vending machine in the country would have to be replaced, at a cost that would be astronomical. It's the same reason it will be a long time before electric cars become commonplace - recharging (or battery-swap) facilities would have to be set up every 50 miles all over the country.

upside22 quips, "The pockets in my pants sure as hell won't take the abuse that dollar coins would generate!"

You can afford pants in today's American economy? Lucky boy!

You think you have this coin tough, give thought to us nudists off to a snack bar while trying to carry fistfuls of dollar coins.

Our family gives away Susan B. Anthony dollar coins for Halloween. Kids and parents love those. Coins are safe and do not rot teeth of children. However, those kids probably use their dollar coins to buy Twinkies from vending machines while playing pinball games.

Are there still pinball machines in bowling alleys?

Dollar coins are simply impractical. An example is our girl, her daddy and I always carry at least a thousand bucks or more in our pocketbooks or wallet. When our girl and I need more money for new high heel shoes, there is always plenty of money in her daddy's wallet; we don't have to spend our money.

Sneaking several hundred dollar coins out of daddy's wallet would make too much noise, all the coin clinking would wake him up.

Heads I win, Tails you lose. This is the feds approach to playing games.

We American taxpayers pay the bill for minting coins, at a loss. The feds turn right around and sell us those coins for a "seigniorage" profit. Other words, we pay for a product the feds produce who then sell this product back to us for a profit.

This is like my milking our cow, giving our milk to the feds, then the feds sell us our milk for their profit.

For readers who are confused about this "seigniorage" profit making by the feds, this year, 2011, printing dollar bills costs the feds about ten cents per dollar bill. The feds sell those dollar bills to Americans for, ready for this, one dollar for each dollar bill. Amazing deal. This is 90 cents profit per dollar bill for the feds.

Strikes me this 90 cents profit per dollar bill could be used to print at least 90 more dollar bills, and each of those 90 dollar bills will earn 90 cents profit for a net profit yield of a bit more than $80 in greenbacks. This $80 in profits will pay for printing about 700 dollar bills. Each of those 700 dollar bills will earn 90 cents in profit....

You readers do the math. You will quickly realize printing dollar bills is a money making machine, no pun intended. There is no need for American taxpayers to pay for printing money nor minting coins. This is a self-sustaining business earning excellent profits. Nonetheless, we taxpayers have to pay for production costs of profit making by the feds. Something ain't right.

However, instead of the feds rolling profits over into making more money, Obama spends those profits on buying Solyndra votes. Lot of good this did for our America.

Jim Kolbe up there tells us we can save money by not printing dollar bills. His is mule manure nonsense. Printing money, minting coins, is a highly profitable business for the feds. Problem is the feds don't know diddly-squat about running a successful business.

Yeah, printing money costs us taxpayers a lot of money because seigniorage profits earned by the feds are wrapped up in tinfoil then hidden away in home freezers of politicians.

This is the root problem DCZE mentions, this federal game of theirs: "Heads I win, Tails you lose".

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seigniorage is a tad bit more complicated than my simple example for understanding a basic principle of government idiocy. Readers are invited to learn more about seigniorage profits here at Wikipedia:

Typical Politician. Ignore Godzilla and focus on the gecko. The Dept. of Education can be done away with, the Dept. of Energy can be dissolved and the Dept. of Homeland Security can be brought in line with reality and we could save a hell of a lot of more money than we could by inconviencing the taxpayers who are already stressed out as hell by forcing them to tote around metal money. We could pick up our sh## and get the hell out of Afghanistan and save money and a few lives too, I think.

9-11 came frome WITHIN the U.S, not from a human cesspool in Afganistan, Iraq or wherever. Money is not WASTED providing the American citizens with basic convienience. It IS wasted by providing Americans with tormenting bureacracy and idiotic wars with no end.

Since the D of E was established, our education system has declined in direct proportion to the increase in it's and influence. We will blow 77 billion dollars this year to support the D of E's mission to destroy our kids.

With the normal growth of these bureaucracies, we could save the1 1/2 trillion in the next decade that the Super-committee couldn't .reach,